Wednesday, February 07, 2007


Unless you mother is your only employee and you plan to never take an income, you will have to do payroll. In fact, unless you have a true micropractice, or a really efficient mother, payroll will most likely be your largest single expense. When I was first going solo, payroll caused me a significant amount of stress because I had no idea how to do it or what it involved. Now I do, and because I’m a nice guy, I’m going to save you stress.

Payroll is broken down into 2 parts; salary and taxes. Salary is how much you pay your workers, for example $10.00 per hour x 40 hours per week. Most people in the US are paid bimonthly, or every 2 weeks. Therefore, you will shell out $10.00 per hour x 40 hours per week x 2 weeks, or $800 per $10/hr employee per pay period. Right? Wrong. You forgot taxes. And the taxes ain’t insignificant.

In my state, NY, I must add ~12.5% to every pay check per pay period per employee. That covers my portion, as the employer, for things like Medicare, Social Security, FICA, and NY state unemployement insurance. It may vary in your local, but not by much. So, in actuality, I must pay ($800 x 12.5%) = $100 + $800 = $900 per $10/hr employee per pay period. So that’s it, right? Maybe.

If you do your own payroll, I mean really do it, and calculate the taxes and pay the taxes to the appropriate governmental agencies at the appropriate times, then that is it. And I do know people who do this, some of them even successfully. The problem with doing this “nitty gritty” of payroll is that any mistakes and miscalculations, even honest ones, that you may make are dealt with via draconian fines and penalties. Perhaps for an experienced small business owner, bringing this degree of payroll management in house makes sense, but for you—and certainly me—in the beginning, it does not.

Instead you can outsource payroll services to one of many payroll companies, such as ADP or Paychex. I happen to use Paychex. For their services, I pay an additional $40 per employee per pay period. Not cheap, but worth it, at least for right now. They call me every other Tuesday and I give them the hours. They do the rest. 2 minutes on a bad day to do payroll. Though in my practice I am frugal, I believe that this represents money well spent. Any other way, for me, is to have frugality cross over into the realm of penny wise and pound foolish.

So there you have it, payroll, as taught by The Independent Urologist School of Bidness.